This article was published on: 12/01/2007 - View Article at Realtor.org
FOR BROKERS: Companies to Watch
BY ROBERT FREEDMAN
There's not much that ambitious broker-owners can do if they want to fuel the growth of their companies through franchise affiliations when they're in markets already saturated with big national names.
They can keep trying to grow as independents a hard road to take, James Courtney thinks. Or they can affiliate with a small but growing franchise like Remerica, an operation Courtney and a partner launched in the early 1990s that now has 30 offices throughout Michigan.
"We've been in a steady growth mode as we've refined our model, but now we re ramping up," says Courtney.
Sales volume of the company's affiliates, currently all in Michigan, have been charting sustained growth over the last several years, although sales volume and transaction sides slowed last year as weakness in the auto industry spilled over into the state s real estate markets. Total closed sales for the company last year was $600 million in 3,600 deals.
To ignite affiliation, the company is selling master franchise agreements for $40,000, handing owners control of regions with a population of 1 million for just 60 percent more than the cost of a typical single-office franchise agreement with many of the national brands. The average single-office franchise fee for established brands in REALTOR® Magazine's 2007 national survey was about $25,000.
"We make it affordable for people who want to get into a regional operation," says Courtney, a 40-year industry veteran who has owned Century 21 and Coldwell Banker franchise affiliates.
Under Remerica's business model, prior to splitting their commissions with their sales associates, brokers take 6 percent of the commission for the annual franchise fee and 2 percent for an annual advertising fee, both of which get passed along to the national franchise.
That's not unlike the models offered by many other franchises. But Courtney points out that his company stops charging that combined 8 percent fee as soon as revenue per associate hits a cap.
The cap will vary, depending on area costs. If it's set at $36,000, $18,000 would come from the associate and $18,000 would come from the broker, assuming a 50 50 split.
Once the cap is reached, brokers can structure a variety of financial arrangements. They can put their associates on 100 percent commission plans and continue to charge them the 8 percent or they can keep them on the split and discontinue the fees. Or they can do some combination of the two.
"It's a good retention policy for the broker," says Courtney, "because agents know they can max out their costs at $18,000."
The company offers a residual-income program, too. Associates keep 10 percent of the brokerage's share of income from each deal closed by colleagues they've recruited. The program goes six generations deep.
For Courtney, today's challenging sales environment is ideal for growing his company. "People are looking for something different," he says. "We provide that at a cost that s affordable."
That's a proposition his company will be testing in the months ahead. In Courtney's sights are master franchise sales in California and Florida in 2008 and in Illinois, New York, Ohio, Pennsylvania, and West Virginia over the next several years.